US declares cold war on China

US declares cold war on China, by Alan Kohler.

In a speech in Washington last Thursday, US Vice President Mike Pence made it absolutely clear for the first time that the United States is not simply engaged in a trade war with China – it is much bigger and broader than that.

It was a remarkably aggressive speech.

And moreover, it wasn’t the off-the-cuff spruiking of President Trump at a rally or on Twitter – it was a long, measured, well-researched, and very detailed attack on China, accusing it, among many other things, of “meddling in America’s democracy” and largely based, according to Pence, on “intelligence assessments”.

Some have since likened it to Winston Churchill’s “The Sinews of Peace” speech in 1946, usually referred to as the “Iron Curtain speech”, in which he declared: “From Stettin in the Baltic to Trieste in the Adriatic, an iron curtain has descended across the Continent,” and predicted the Cold War between America and Russia. …

Pence went much further [than Trump], broadening the contest between America and China well beyond trade and into fundamental ideology — and security. If his speech is not ringing alarm bells in Canberra, it should be.

A few examples:

  • “China wants nothing less than to push the United States of America from the Western Pacific and attempt to prevent us from coming to the aid of our allies. But they will fail.”
  • “…by 2020, China’s rulers aim to implement an Orwellian system premised on controlling virtually every facet of human life — the so-called “Social Credit Score.”
  • “China has built an unparalleled surveillance state, and it’s growing more expansive and intrusive – often with the help of US technology.”
  • “China uses so-called “debt diplomacy” to expand its influence.” …
  • “The Chinese Communist Party is rewarding or coercing American businesses, movie studios, universities, think tanks, scholars, journalists, and local, state, and federal officials.”
  • “China has initiated an unprecedented effort to influence American public opinion.”
  • “We’ll continue to take action against Beijing until the theft of American intellectual property ends once and for all. And we will continue to stand strong until Beijing stops the predatory practice of forced technology transfer.” …

The most important technology is semi-conductors:

The Chinese government has been trying to build a semiconductor industry for decades but so far has not yet made much of a dent in the country’s reliance on imported foreign chips, specifically American.

China has built a decent industry in memory chips, but these are mostly low margin and don’t support large R&D spending. The firms concerned have had to rely on government subsidies to fund research.

The result is that the Chinese companies haven’t been able to build alternatives to the leading edge chips being developed by Nvidia, Intel, Qualcomm and Broadcom, not to mention the work being done on vehicle automation by Google subsidiary Waymo and Mobileye. …

Trade war:

As Mike Pence said in his speech on Thursday: “Beijing now requires many American businesses to hand over their trade secrets as the cost of doing business in China.”

This is what the Trump Administration is trying to intervene in: the tariffs are meant to disrupt the supply chains that have developed and to force US companies to look elsewhere.

Very important of course, but Australia is well prepared — so relax. (Irony.)

hat-tip Stephen Neil